Excessive business rates in the North continue

Ratepayers in Yorkshire and the North East are still paying excessive business rates despite the 2017 Revaluation, according to rating expert Robin Ellis at property firm CBRE.

Whilst there has been some recovery in many parts of the UK, the changes in rental levels over the seven year period have not been uniform.

Since 1990, there have been five yearly rating revaluations, however, despite the latest Revaluation being badly needed, the 2017 Rating Revaluation was deferred for two years by the Government. The previous Rating List (from 2010) was based upon rental levels at around 1 April 2008, predating the financial crisis.

Since 2008, there has been substantial variations in the movement of rental values between property sectors, regions and even from one street or building to another.

Perhaps the largest divergence in rental values is in the retail sector where typically, a prime shop on Oxford Street in London has seen an increase in Rateable Value of 89 per cent from the 2010 List to the 2017 List.

In stark contrast, a prime retail unit on Briggate in Leeds has decreased over the same period by 36 per cent, on Fargate in Sheffield a decrease of 23 per cent and on Northumberland Street in Newcastle a decrease of 20 per cent.

Whilst the 2017 Rating Revaluation has reflected the changes in rental value over a seven year period, for many occupiers, where the RV has reduced, this will make very little difference to their rates bill due to the Government’s transitional phasing scheme.

To summarise, the increase in rates payments on an Oxford Street shop will be phased in over two years. In comparison, the rates liability for a shop on Briggate reduced by just three per cent this year and will reduce by a pitiful 0.9 per cent next year.

Payments are still going to be based on the 2010 RV less small incremental falls over the next five years. The same can be said for a shop in Fargate, Sheffield and Northumberland Street, Newcastle. In all of these locations, the 2017 RV will be irrelevant to rates payments for the entirety of the 2017 Rating List.

The transitional phasing scheme is self-funding. In effect, ratepayers in Yorkshire and the North East will continue to subsidise ratepayers in London and the South East. It would be far more equitable if downward phasing could be applied at a similar rate as upward phasing so that the Rating Revaluation has the impact which was intended.

Robin Ellis, director, Property Tax Group – Rating and Lease Consultancy at CBRE in Leeds, said: “Such fluctuations in the rental value is the reason why regular revaluations are necessary, underpinning the integrity of the rating system as a fair and reasonable property tax.

“For occupiers in Yorkshire and the North East, who have waited seven years for a Rating Revaluation to catch up with the impact of the financial crisis, it seems very unfair that they should have to wait at least a further five years before their rates bills properly reflect the true levels of rental value.”